For the chemical process considered in Example 10.1, calculate the sensitivity of R, COM , and FCI and plot these sensitivities with respect to the NPV.

Example 10.1

A new chemical plant is going to be built and will require the following capital investments (all figures are in $million):

Cost of land, L = $10.0

Total fixed capital investment, FCI = $150.0

Fixed capital investment during year 1 = $90.0

Fixed capital investment during year 2 = $60.0

Plant startup at end of year 2

Working capital = $30.0 at end of year 2

The sales revenues and costs of manufacturing are given below:

Yearly sales revenue (after startup), R = $75.0/y

Cost of manufacturing excluding depreciation allowance (after startup), COM = $30.0/y

Taxation rate, t = 45%

Salvage value of plant, S = $10.0

Depreciation: Use 5-year MACRS.

Assume a project life of 10 years.

Calculate each nondiscounted profitability criterion given in this section for this plant.